Thereâ€™s a financial program in Canada that has been around for decades that is geared to supporting the Entrepreneur in the Startup process. Itâ€™s called the Canada Small Business Financing Program. It supports the business with up to a $500,000 loan.
Thereâ€™s a slight problem though, hardly anyone in British Columbia knows about it.
Financial institutions deliver the program and make all credit decisions.Â Â Small businesses must visit their local bank, credit union to obtain a loan under the program.
While the loan is available to startups most banks may be reticent about giving out the loan. There may be a variety of reasons why they donâ€™t like the loan besides not knowing about it. They may not like all the paperwork – but after all it is a government guaranteed program there has to be lots of paperwork. It could be the maximum interest rate they can charge; no more than 3% over prime. Maybe the maximum loan of $500,000 is too much for banks to loan to new business.
Vancity and Coast Capital credit unions offer government guaranteed character based loans. These loans require good proforma financials (future earning spreadsheets) versus the old standard 2 or 3 years of financial records and a decent business plan. After all how can a startup provide past financial records? These 2 credit unions have a cap on the loan mind you of about $35,000 but it is a character based loan not requiring a personal guarantee.
Iâ€™m thinking our conservative banks may find that a little daunting even though the government will again guarantee up to 85% of the loan if it the business defaults. . Iâ€™d like to look into this further. My feeling is that BC banks support small business in words but donâ€™t follow through with loans.
Industry Canada is on a mission this month to inform prospective borrowers of the loan. Some info is available as follows:
Canada Small Business Financing Program
Small businesses are an important part of Canadaâ€™s economy, but they face unique challenges when seeking financing.Â The Canada Small Business Financing Program makes it easier for small businesses to obtain loans from financial institutions by sharing the risks with lenders.
Small businesses operating for profit in Canada with gross annual revenues of $5 million or less. Farming businesses, not-for-profit organizations, or charitable and religious organizations are not eligible under this program.
Loans can be used to finance up to 90 percent of the cost of
- purchasing or improving land, real property or immovables;
- purchasing leasehold improvements or improving leased property; or
- purchasing or improving new or used equipment.
Amount of Financing
Up to a maximum of $500 000 for any one business, of which no more than $350 000 can be used for purchasing leasehold improvements or improving leased property and purchasing or improving new or used equipment.
The interest rate is determined by the financial institution. The following two options are available:
- Variable rate: The maximum chargeable is the lenderâ€™s prime lending rate plus 3 percent.
- Fixed Rate: The maximum chargeable is the lenderâ€™s single family residential mortgage rate for the term of the loan plus 3 percent.
How to apply for a loan or For more information on the Canada Small Business Financing Program
Tel. (toll free): 866-959-1699